When running Google Ads, one of the most important things that you need to be watching is your cost per acquisition or your CPA.
Most campaigns don’t use CPA targeting correctly. The cost per acquisition lifetime value is how you should be structuring and planning your campaign so that you are winning the auctions and getting better ROI.
In this article, Cost Per Acquisition, I will show you what you need to do to get your CPAs to work well for you.
Watch the video version of this article below:
Cost Per Acquisition in Google Ads
The first step in planning a Google Ads campaign is to get a clear budget on exactly how much you can afford to acquire customers.
Let’s say that you’ve got an average ticket of 400 USD and your ads are set for a max CPA of 100 USD. You’re building in a projected 4x ROI. Sounds good right? Wrong.
When you do your research and you can determine that with recurring revenue, upsells, cross sells, and referrals, your real average customer lifetime value is 1400 dollars. This is a big difference!
You don’t necessarily need to plan the income that you’ll get from the customer for a lifetime. I typically suggest when planning out a campaign about 12 to 24 months of projected revenue to calculate the customer lifetime value for the purpose of generating incoming leads.
Sometimes, your lifetime value can be extremely high but for forecasting a Google Ads campaign, 12 to 24 months is a good solid number that i like to use.
The next thing is, I want you to ask yourself how much you can afford to get a customer based on your customer lifetime value.
Our example is 1400 USD. This gives you a lot more bidding power than 400 USD. I assure you, most of your competition bids at upfront revenue. By knowing your numbers, you can bid smarter, more aggressively, and you can get better results in the auction.
Remember, he who can afford to acquire a customer at the highest price wins. Don’t guess that you know your numbers. Get the customer lifetime value and you bid accordingly. You should be able to turn a predictable and a consistent profit and be able to scale well.
By knowing your numbers ahead of time, you know what you’re scaling to, you know how it performs under manual controls, and then when you turn it over to TCPA, you’re building in a machine learning and you’re going after that return on investment.